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U.S. June auto sales strong with signs pointing to solid 6 months ahead

In this Wednesday, May 8, 2013, photo, Jeff Caldwell, 29, right, a chassis assembly line supervisor, checks a vehicle on the assembly line at the Chrysler Jefferson North Assembly plant in Detroit. (AP / Paul Sancya)

DETROIT -- Three years ago, U.S. car buyers started trickling back into showrooms after largely sitting out the recession. That trickle has turned into a flood.

From owners of revitalized small businesses that need to replace aging pickups to new hires who need a fresh set of wheels for the daily commute, increasingly confident buyers pushed auto sales back to pre-recession levels in the first six months of this year. Sales in the January-June period topped 7.8 million, their best first half since 2007, according to Autodata Corp. and Ward's AutoInfoBank. Automakers reported June sales Tuesday. They rose 9 per cent to 1.4 million.

The outlook for the rest of 2013 is just as strong. The factors boosting sales -- low interest rates, wider credit availability, rising home construction and hot new vehicles -- will be around for a while, and experts are hard-pressed for answers when asked what could slow things down.

"It all points to continuing improvement in the auto market," said Mustafa Mohatarem, General Motors' chief economist.

Analysts expect total sales of around 15.5 million cars and trucks in 2013, which would be 1 million more than in 2012. New cars and trucks sold at an annualized rate of 15.96 million in June, the fastest monthly pace since December 2007. From January to May, the pace averaged 15.2 million, according to Jessica Caldwell, a senior analyst at car buying site Edmunds.com.

Demand for big pickups has been the driving force. GM, Ford and Chrysler sold 157,480 full-size pickup trucks combined in June. That is up around 25 per cent from the same month a year ago and almost double the number the companies sold in June 2009, a year when total sales sank to a 30-year low. GM said its new Chevrolet Silverado and GMC Sierra, which went on sale last month, are spending just 10 days on dealer lots before being sold. A 60-day stay is typical.

The pickup boom helps everyone, but especially the Detroit automakers, which sell the vast majority of trucks. And prices are rising as automakers add fancier features. Pickup trucks sold for an average $40,361 in June, up 2 per cent from last year, according to Kelley Blue Book.

But trucks weren't the only thing driving sales. Small and subcompact cars sales were also strong, possibly because young graduates went shopping for a new car, said Kelley Blue Book analyst Alec Gutierrez. Relatively high gas prices also may have steered some buyers to more fuel-efficient models, he said. Gas averaged $3.60 a gallon nationwide in June, or 10 cents more than a year ago.

Sales of Ford's recently updated Fiesta subcompact more than doubled, while the Hyundai Elantra small car saw a 22-per cent gain.

Family-haulers also did well to start the summer road trip season. Honda said sales of its Odyssey minivan jumped 26 per cent. The Toyota RAV4 SUV was up 36 per cent, while sales of the Jeep Grand Cherokee SUV rose 33 per cent.

Consumer confidence hit a six-year high in June. And the Standard & Poor's 500 index had its best first half since 1998, up 12.6 per cent. Those measures correlate strongly to auto sales, since people have to feel optimistic and financially secure before buying a car.

At the same time, rates on auto loans remained near historic lows in June. The rate on a four-year new-car loan is averaging 2.7 per cent, according to Bankrate.com.

Federal Reserve Chairman Ben Bernanke has pledged to keep short-term interest rates at record lows until the unemployment rate hits 6.5 per cent, if not longer. The unemployment rate is currently 7.6 per cent. Auto loan rates are pegged to short-term rates, so car buyers should enjoy low financing terms for a while longer.

Automakers can also keep rates low through their captive finance companies, Edmunds.com's Caldwell said. She expects car companies to help keep rates low for a while, since raising them could hurt sales.

Auto executives said Tuesday that they're not too concerned about loan rates, because there are so many other positive factors encouraging buyers. Ford's U.S. sales chief, Ken Czubay, pointed out that there are still 4 million pickups on the road that are 12 years old or older and will likely need to be replaced soon.

Here are results posted Tuesday by major automakers:

Detroit brands: GM's sales rose a better-than-expected 6.5 per cent in June. In addition to pickups, the Chevrolet Cruze small car was a big seller, with sales up 73 per cent over last June. Buick was GM's only brand than faltered, with sales down 4.5 per cent. Ford's sales rose 14 per cent on big demand for cars and the Escape small SUV, which had its best month ever. Chrysler gained 8 per cent despite a public flap with the government last month over the safety of some older-model Jeeps. Dodge sales were up 12 per cent and Ram sales jumped 23 per cent.

Japanese brands: Toyota's sales rose 10 per cent thanks to strong sales of the Camry sedan, Prius hybrid and the newly redesigned Avalon sedan, which nearly quadrupled its sales over last June. Honda's sales also rose 10 per cent on solid demand for the Civic and Accord sedans as well as SUVs. Nissan's sales jumped 13 per cent. The Altima and Sentra sedans both recorded double-digit gains. Sales of Nissan's electric Leaf quadrupled to 2,225 after the company lowered the price earlier this spring.

Others: Volkswagen's sales dropped 3 per cent, the third straight monthly decline for the German car company. Sales of the Passat and Jetta sedans were up, but the Golf dropped sharply as fans waited for a redesign expected later this year. South Korea's Hyundai had its best June ever, with sales up 2 per cent. Elantra small car sales rose 26 per cent and Santa Fe SUV sales were up 14 per cent.